WHEN IT COMES TO health insurance, it often looks as if the world is divided into the haves and the have nots. If you're lucky enough to have traditional indemnity insurance, the thinking goes, you enjoy the freedom to choose your own doctor, who has the freedom to order any treatment he or she deems necessary. And then there's the other 92% of us, stuck in those penny-pinching HMOs, PPOs and other Orwellian acronyms of managed care.

But talk to one of the supposedly fortunate few who still have a traditional health plan, and you'll get quite a different picture. These days, we're all health-insurance have-nots  or at least have-lesses. Facing ever-increasing medical costs, the indemnity plans are cutting back, too. Their patients are running into a confusing thicket of exclusions, exceptions, co-payments and deductibles  all of which are steadily eroding their choices and increasing their out-of-pocket expenses. Sandy Kelly, a nurse from New Jersey, says her indemnity health plan includes so many clauses it's tough to know in advance what will be covered and what won't. She often has no idea how much of a medical bill she will have to pay until she gets a check back from the insurance company. "You think you are buying the Cadillac," she says. "You had better see what that Cadillac has in store. You might not have a light in the glove compartment."

So if you're hoping to switch back to a traditional indemnity plan, you should know that the grass may not always be greener on the other side. If you're now in such a plan, there are ways to avoid some of the common pitfalls, and ways to make the system work to your advantage.

1. "You can go to any doctor, but don't expect us to pay as much as you expect."
Traditional plans claim they pay 80% of your medical bill. But when you read the fine print on your policy you see that isn't always true. Health plans reimburse their members 80% of "reasonable and customary" charges. What's reasonable and customary? It's what other health-care providers of similar training or experience in the same or similar geographic area charge for such services. If your doctor's fee is higher, you end up paying the difference.

How do you know if your doctor's charges are typical? You don't. Often the only way to find out how much of your total bill will be covered is to send in a claim and hope for the best. The reasonable and customary rates aren't published in your benefits manual.

Don't expect your doctor to know what they are, either. The plans themselves differ greatly. Plus, your physician doesn't even know what the competition next door is charging since antitrust laws prevent rivals from comparing prices. According to Barbara Seller, a midwife practicing in New York City the only way she can tell if her rates are in the ballpark with her peers is from feedback from her patients. "They would have a heart attack if it was out of line," she says. "I always try to keep [my fee] where it is until our expenses go up and we have to raise it."

2. "We're pretty arbitrary about how much we'll cover."
Margaret Wilton, a school teacher from New Jersey, was diagnosed with breast cancer four years ago. She was shocked when her insurance company didn't cover a portion of her treatment. "I went to Sloan Kettering and they said it was too expensive," Wilton says.

Wilton's experience isn't unique. The American Medical Association and the Medical Society of the State of New York are suing Metropolitan Life for setting "reasonable and customary" charges using allegedly unreliable or outdated data that isn't available to the public. The AMA also contends that the fees are too low. In another case, The Medical Association of Georgia is suing Blue Cross & Blue Shield of Georgia for breach of contract. In this case, Georgia Blue adopted new rules and regulations that would calculate how much it will reimburse doctors according to the fees actually received by physicians rather than by what they initially charge. This new method ensures lower payment for the doctors and higher out-of-pocket expenses for patients who must pay the difference.

3. "We only cover you if you are sick."
Indemnity plans aren't in the business of paying for preventive care. Unlike their HMO counterparts, they don't typically cover most immunizations and annual check-ups for anyone over the age of six. Most will reimburse you only if you are sick and receive a diagnosis from your physician.

If you have a very generous plan you'll be reimbursed for one physical a year. Sounds great, right? Not so fast. "What we are finding out is that when you go to your ob/gyn, it counts towards your physical," Kelly says. "But we all know that it is not [a physical]." As a result, women are often stuck picking up the entire tab for physicals by internists.

4. "We try to delay payment as much as possible."
Barbara Xavier, an office manager in a midtown Manhattan dentist's office, says insurance companies will try anything to delay payment. "They used to request an x-ray as a delay tactic," she says. "Then all the doctors got smart and started enclosing them." "Now they are changing post-office boxes." Xavier, who has 30 years' experience, finds she is constantly getting claims returned because of an address change at the insurance company. She then has to contact the patient, who in turn has to go back to his company benefits manager to find the new address. "By the time the patient gets back to me, two weeks have gone by," she says. A spokesman for the Health Insurance Association of America says he isn't aware of any change-of-address complaints or that such delaying tactics are prevalent in the industry. According to the HIAA, most claims are paid in 14 days.

However, consumers and health-care providers have filed a total of 67,500 complaints against insurance companies in New York State alone since its Prompt Payment Law went into effect in January 1998. According to the New York law, HMOs and insurers are required to pay undisputed claims within 45 days of receipt. In October 2000, the New York Superintendent of Insurance Neil D. Levin announced that the department had issued fines against 21 health insurers (including ones that offer traditional plans) and HMOs totaling $575,000.

The majority of states have prompt payment laws, although they vary greatly.
(Currently, only Alaska, the District of Columbia, Idaho, Indiana, Iowa,
Nebraska, New Hampshire, North Dakota, Oregon, Rhode Island, South Carolina and
South Dakota don't have such a statute.) If you do live in a state with this
protection, consider including a copy of the law with your claim. This is one of
the best ways to ensure you get reimbursed quickly. You can find this on your
state's department of insurance Web site.

5. "You're paying first class prices but getting the same care as everyone else."
With 92% of the insured population participating in some type of managed-care plan, most health-care providers feel pressured into joining up with an HMO to survive. "How can you close the door on that revenue stream?" asks Jeffrey Gopen, a physical therapist in Massachusetts.

Ilana Zarafu, the former medical director and now a board member of Children's Specialized Hospital in Mountainside, New Jersey, says she has only two professional friends who don't accept Medicaid or HMOs. At first many doctors thought they would all band together and refuse to join these networks, Zarafu says. "But in metropolitan areas there are gluts of doctors and you can't be exclusive," she says.

How does this affect you? Chances are, your expensive physician is giving your neighbor the same treatment for a fraction of the price. If virtually all of your doc's patients are in an HMO, it's likely that he has tailored his practice accordingly  particularly when it comes to how many patients he has and how much time he gives them. "The majority of facilities, including private practice, are working at maximum capacity and trying to increase productivity," says Gopen. "Outward pressure to improve productivity comes down to seeing more patients and spending less time with them."

But it also means that if you choose to join an HMO yourself, you won't necessarily have to change doctors. And if you do, it's now a lot easier to find good physicians who are participating in a plan than it was just a couple of years ago.